Fitch warns India of downgrade in 1-2 years
08 Jan 2013
Ratings agency Fitch today said India could face a downgrade from its current BBB- rating in the next 12-24 months, as the government is likely to miss its fiscal deficit target for the current financial year. The recent macroeconomic trends have also been disappointing, a Fitch analyst said.
Terming India's macroeconomic trends as "disappointing", Fitch said it is awaiting the final fiscal numbers for the current year and that the union budget for the fiscal year 2013-14 will be important for ratings.
Although growth may have bottomed out, trend growth may have slipped further due to structural bottlenecks, it said, adding that a fall of the trend growth to between 6 and 7 per cent would be a negative for ratings.
However, economic affairs secretary Arvind Mayaram was quoted by PTI as saying the government is not worried about the threat of a downgrade from Fitch, as India will be able to restrict its fiscal deficit to 5.3 per cent of the GDP.
Fitch said the high current account deficit is a concern and the ability to fund the deficit is crucial.
The current account deficit, which represents the difference between exports and imports after considering cash remittances and payment, widened to a record high of 5.4 per cent of GDP - $22.3 billion (Rs123,254.64 crore), in the July-September quarter as export growth slowed more sharply than imports, with a similar gap expected in the December quarter likely to prolong weakness in the rupee, it said.
